Many investors today stick to exchange-traded index funds and the like, and that can be an excellent idea. Tracking the movements of the major market indexes over decades remains a good way of building up a retirement nest egg, especially for the most disciplined. At the same time, investors who are willing to put in a little more work have other interesting opportunities to look into, as well. For younger investors who can afford to take some risk or older ones trying to catch up, investing in particular stock issues can be a good way of juicing up a portfolio even more.
Of course, it always makes sense to prepare as well as possible before making the leap. For those who learn stock market basics, though, investing in particular stocks can be just as easy and rewarding as letting money ride in index funds. While the risks will always be greater, since investors no longer have the averaging effect of large indexes to rely upon, the returns can be more impressive for the very same reason.
For most investors, the best way to get started with this kind of stock picking is to learn about the fundamentals. Every since the first stock markets came into being, this approach to investing has been the most popular, and it remains so even in the age of high-frequency trading. Put simply, fundamentals-based investing involves measuring a company’s current stock price against the quality of the underlying business indicators. As expressed in common measures like the price-to-earnings ratio, this can be an excellent way of spotting good opportunities to buy.
Other investors who decide to dive into things even more deeply will inevitably come across talk of technical trading, too. Unlike fundamentals-based investing, this approach views stocks and their price movements essentially in a vacuum. Technical traders look not to underlying indicators of business-related performance but to price and volume changes themselves to inform their decisions, a craft that can easily become extremely arcane and complex.
In every case, though, investors who seek to make money from particular stock picks will find plenty of help available to them. For those who commit to learning as they go, the journey is inevitably a rewarding one.